Russian social media CEO quits, flees country

MOSCOW — The founder of Russia's leading social media network — a wunderkind often described as Russia's Mark Zuckerberg — has left his post as CEO and fled the country as cronies of President Vladimir Putin have made steady inroads into the company's ownership.

By LAURA MILLS

capecodtimes.com

By LAURA MILLS

Posted Apr. 23, 2014 at 5:35 PM
Updated Apr 23, 2014 at 5:40 PM

By LAURA MILLS

Posted Apr. 23, 2014 at 5:35 PM
Updated Apr 23, 2014 at 5:40 PM

» Social News

MOSCOW — The founder of Russia's leading social media network — a wunderkind often described as Russia's Mark Zuckerberg — has left his post as CEO and fled the country as cronies of President Vladimir Putin have made steady inroads into the company's ownership.

The slow-motion ouster of Pavel Durov from the network known as VKontakte, or "In Contact," is the latest sign that independent media outlets in Russia have become increasingly imperiled.

Although months in the making, the loss of Durov's leadership in VKontakte means that the space for free speech on the Russian web could shrink even further.

Users on VKontakte were even spreading jokes this week that the new nickname for the "In Contact" website should be "In Censorship."

As one of his final acts of defiance, Durov posted online last week what he said were documents from the security services, demanding personal details from 39 Ukraine-linked groups on VKontakte, also known as VK.

Kremlin pressure on VK has been accompanied by increasing enforcement of Russia's law against extremism, which took some prominent opposition and pro-Ukraine sites off the web in March.

On Tuesday, the Russian parliament passed a law requiring social media websites to keep their servers in Russia and save all information about their users for at least half a year. The same law, which will go into effect in August if signed by Putin, gave bloggers the same legal status — and responsibilities — as media outlets, making them more vulnerable to accusations of libel or extremism.

Since the protests began in Ukraine, Putin and much of Russian media have amplified the patriotic rhetoric, proclaiming the need to secure Russia from enemies both foreign and domestic. In a televised call-in show last week, Putin equated those critical of Kremlin policy in Ukraine with Bolshevik revolutionaries who rooted for Russia's defeat in World War I, and discussions about the country's traitorous Fifth Column have become the fare of state television.

VK, which largely resembles an older version of Facebook, attracts about 60 million users daily, primarily from countries in the former Soviet Union, vastly outstripping Facebook's reach in the region. It played an instrumental role in bringing hundreds of thousands of protesters into the streets in late 2011 in the wake of widely manipulated parliamentary elections, and it has played a part in drawing crowds to the Kiev protest movement that helped oust Ukraine's pro-Russian president in February.

"There's been a trend that started with the protests of December 2011, when the authorities started fearing the crowd and especially the online crowd," said Anton Nossik, Russia's leading Internet entrepreneur. "The pressure of censorship is mounting on Russian websites from lawmakers who think that the Internet is their foe."

The 29-year-old Durov has cultivated a reputation as a rebel willing to stand up to Kremlin pressure, ostentatiously refusing to shut down VK groups linked to the Russian opposition movement or to give out personal information on its leaders.

He also has become known for more eccentric stunts, like throwing paper airplanes made of 5,000 ruble notes (about $140 each) out of his office window, or posting a picture of his middle finger online after breaking up a major deal with a pro-Kremlin investor.

Since opening in 2006, VK has thrived on the same devil-may-care reputation as its founder. While much of the website's success was thanks to Facebook's sluggish adaptation to the Russian market, VK cemented its status as a Russian staple by hosting thousands of pirated video and music files, which users can watch for free.

It didn't take long for VK to attract the attention of investors as well as the government. In 2010, one major investor who was friendly with Durov handed his stake in the company over to Mail.ru Group, a holding company owned by Russia's richest man and Putin crony Alisher Usmanov

That move was followed by a large sell-off by Durov's old allies in April 2013 to UCP, a company reportedly owned by Igor Sechin, the chief of Russian oil giant Rosneft and a member of Putin's inner circle.

That left Durov himself, who only learned of the deal after it had been signed, as the last remaining holdout in the company ownership. He stayed on as CEO, but increasingly found himself in standoffs with its new stakeholders.

"A shareholder war started," said Nikolai Kononov, who wrote the book "Durov's Code" about VK. "It seems that Durov already understood at that moment that he should sell his shares. But at the same time, he wanted to preserve the project he built, as well as his reputation. Hence why it's taken so long."

That same month, a criminal investigation was opened into Durov's alleged participation in a hit-and-run incident with a St. Petersburg police officer — a case that Durov's supporters said was fabricated and linked to political pressure on the organization.

In June 2013, the case against Durov was quietly closed, but the message it sent was clear. In January, he sold his remaining 12 percent share in the company to Ilya Tavrin, another businessman linked to Usmanov. He also moved to diversify his portfolio outside Russia: With the help of his brother, he developed the messenger service Telegram, a Berlin-based company that he marketed as a completely hack-resistant communication tool, impenetrable even to the prying eyes of the National Security Agency.

If Durov wanted to develop Telegram and cultivate a name for himself as an uncompromising businessman abroad, that would mean keeping VK free of Kremlin influence as long as he was CEO of the company. Kononov said.

But Durov's timing couldn't have been worse: After Putin returned to the presidency in 2012 amid the large anti-Kremlin street protests, he tried to consolidate his power by passing a series of laws clamping down on the opposition.

Many deemed social media, which had provided a platform for protest leaders, a likely next casualty. This spring, the Livejournal blog of opposition leader and anti-corruption activist Alexei Navalny was wiped off the web. For VK, which continued to allow groups in support of Navalny or Ukraine's protest movement to exist, it appeared it would only be a matter of time before its pro-Kremlin investors would start cracking down.

Durov's exit from the company was drawn out and chaotic. After selling his shares in January, Durov posted a message April 1 that he was quitting the company — only to say two days later it had been an April Fool's joke.

On Tuesday, he said he had been fired from the company and only found out through the media. One of the pro-Kremlin stakeholders claimed Durov had signed his own resignation letter a month ago and never withdrew it, while another insisted that Durov had no right to quit. Durov is being sued by one of the stakeholders, UCP, which accuses him of diverting money and programming talent from VK and using them to develop Telegram instead.

Durov told the technology magazine Techcrunch that he had left Russia and had no plans to return in the near future.

"In this way, today VKontakte will be transferred to the full control of Igor Sechin and Alisher Usmanov," he wrote on his VK page Monday night. "Under the conditions in Russia something like this was probably inevitable, but I am happy that we held out for seven and a half years. We did a lot."